We maintain the investment rating for China Gold International (the "Company") as "Accumulate", with TP of HK$34.30. Our TP represents 6.3x 2023 PER and 5.7x 2024 PER. We expect gold price to continue to rise in 2023, which will lift profitability of the Company.
　　We expect gold price to continue to rise in 2023 and China Gold International’s net profit to gold price is highly elastic. The US Federal Reserve is approaching the terminal point of interest rate hike and significantly relieve the pressure weighing on gold price. Actual yield-curve of US Treasuries is expected to decline in the future and thus increasing attractiveness of gold assets. As the US inflation situation is improving while macro economy is still under great pressure, we believe the time of interest rate cut may come soon. We believe the attractiveness of gold assets is growing and investment demand of gold assets may grow largely in the cycle of interest rate cut. China Gold International produced 238,836 oz of mined gold in 2022. The production of the Company in CSH Gold Mine was stable, but mined gold output from Jiama Mine is expected to decrease in 2023.As the Company’s production costs of mined gold are relatively high, net profit of the Company has become more elastic to gold price. We believe that the Company will benefit more when gold price rises.
　　We believe the suspension of the Jiama Mine is provisional. The production of the Jiama Mine has been suspended since March 27, 2023 due to an overflow accident of its tailing pond. As a result, the Company did not record any sales from Jiama Mine from the 2nd quarter of 2023 till now. The Company is adopting active measures to promote the resumption of production of the Jiama Mine. The dam's repair and major reinforcement works have been completed by now and some reinforcement works are still in the final stage. The Company is committed to submitting a safety assessment report to the regulatory authority on or around the end of August 2023. We believe that total mined copper output will decrease about 30,000-40,000 tons in 2023, and total mined gold output will decrease 35,000-45000 oz in 2023. We believe the suspension of the Jiama Mine is provisional and the Company will try its best to compensate output loss after the Jiama Mine resumes production.